HERI Committee Report

CHAPTER TWO: PRODUCTION

Canada's book publishing sector plays an important role in disseminating Canadian cultural materials to Canadians and the rest of the world. In general, most are small enterprises, deeply rooted in a local community that specialize in nurturing distinctive, regional literary voices. Many are well known in their home provinces, but virtually unknown elsewhere.

In a brief submitted to the Committee, the Department of Canadian Heritage noted that:

Our authors are well represented in the domestic market, with nearly 50% of [titles] sold in Canada authored by Canadians; [furthermore] 80% of Canadian-authored books are published by Canadian-owned and -- controlled publishing houses.

Nevertheless, despite these encouraging numbers, the Department went on to observe that:

the Canadian book industry faces challenges brought about by market size and ... changes in the global and domestic market. [In particular], increased consolidation among retailers and [foreign] publishers and the lack of access to capital make it difficult for Canadian firms to compete in the changing environment.²²

These challenges have prompted some observers to question both the short- and longer-term implications for the economic wellbeing of the Canadian book industry and its various stakeholders. For example, some fear that increased centralization by a national chain will overlook a work that is not an international blockbuster. Indeed, as Mr. Michael Harrison, President of the Association of Canadian Publishers explained to the Committee:

In recent years we have had ongoing problems ... as any business does. Basically the industry is made up of small businesses. Even the largest companies within the Canadian-owned industry are relatively small, certainly in contrast to the Time Warners and Random Houses of the universe. But we've had to withstand mergers within this group, and we have incredibly well-heeled competition who can afford to pay higher advances for authors who are free to go to any publisher they wish. ... [T]his creates pressure on our business. It's much harder for our companies to gain access to the authors to make the real success stories in the business that help pay for the broad sweep of the titles we do.²³

In light of these circumstances, it can be seen why requests for federal government action to combat chronic under-capitalization and excessive market control were repeatedly voiced during the Committee's hearings on Canada's book industry. Examples of witness recommendations included:  

• Find a way of controlling discounts publishers can give to retailers to guard against absolute dominance of the big box format.²⁴
• ... ensure that we preserve the cultural diversity of this country at a grassroots level. ... We're simply looking for that support to get the infrastructure in place.²⁵
• ... continue to support creation and national publishing, ... promote the distribution of French books in the other Canadian provinces and territories.²⁶

And,

• ... address the chronic under-capitalization of the Canadian publishing industry ... [and] implement an equity tax credit to attract new private sector investment to meet the need to embrace new technologies, ... the ever-changing demands of our markets, and to remain competitive.²⁷

Ms. Sheryl McKean, Executive Director of the Canadian Booksellers Association told the Committee that the increased concentration of ownership in Canada's book industry not only affects "discounts, terms of trade, and distribution" practices, but can "affect creators, producers, retailers, and most importantly, Canadians and our culture."²⁸

To what extent, however, are these concerns justified? Furthermore, how can we better identify and understand some of the potential consequences of recent trends in book publishing? And -- most important for this discussion -- how are industry trends affecting the available number of
Canadian-authored titles for Canadian readers and consumers?

This chapter addresses these questions by taking a step back from witness testimony to examine recent data on Canadian book publishing, sales and revenues as well as the role the Government of Canada plays in support of this sector.

Although this chapter uses language that is more often used to describe industrial production, it is written in full recognition that what is being produced is the work of Canada's literary creators. Books, whether they be works of fact or fiction are indeed marketable "products" that are works of imagination, or of in-depth research and analysis. The Committee realises that without the unique skills and insights that our writers bring to their work there would be no sustainable publishing industry in Canada.

A. AN OVERVIEW OF CANADIAN BOOK PUBLISHING

The number of Canadian-authored books produced in a given year varies notably depending upon on who is collecting and reporting the data. Statistics Canada, the Department of Canadian Heritage, and the Canada Council for the Arts each collect and report statistics in unique ways. Each offers a statistical 'snap-shot' of publishing in Canada, but each picture presents a different perspective of Canadian publishing activities. The result is that for all the numbers available, it is difficult, if not impossible, to compare them. It is, however, possible to make some inferences from the available data. Before turning to a review of Canadian Heritage and Canada Council data collection methods, this section begins by summarising the data that Statistics Canada collects on the publication of Canadian-authored titles in Canada.

1. Statistics Canada's Archival Data

The usefulness of Statistics Canada's archival data is that it offers a broad lens through which an examination of the Canadian literary sector can be made. Every two years it presents data collected from publishers large and small from across Canada. The most recent survey, which will be released in 2000, will deal with publishing activities in Canada in 1998. Its objective "is to provide statistics on the activities of book publishing and exclusive agents, regardless of the amount of earned revenue. Such information is used by the private sector in corporate decision making as well as by all levels of government. It provides the basis for informed decisions on policies and programs in the publishing industry."²⁹

Unfortunately, there have been several changes to the survey over the years. For example, starting in 1990, publishers had to earn a certain amount of revenue to be included in the survey, but this was dropped in 1996. This makes long-term comparisons difficult. Nevertheless, the advantage of Statistics Canada data is that they capture a wide range of information that can be used to develop an understanding of the scale of the Canadian literary sector.

Table 2.1, for example, provides some interesting insights into the successes of Canadian publishers in the 1990s. As can be seen, the number of new titles released by Canada's publishers increased steadily between 1991 and 1997, with 9,152 new titles published in 1991-92 and 11,400 in 1996-97. During this same period, the total number of books in print increased from 62,115 to 87,949.

With respect to total revenue, Canadian publishers experienced steady growth, with revenues rising from $1.5 billion in 1991-92 to nearly $2 billion in 1996-97. At the same time, the percentage of profitable firms fluctuated considerably during this period, with the number of profitable publishers dropping most notably between 1994-95 and 1996-97, from 71.9 to 50.5%.³⁰

Statistics Canada makes a distinction between the income a publisher derives from its own publications and from exclusive agency contracts.³¹ When these figures are viewed side-by-side, they indicate that the growth in income from exclusive agency arrangements through the 1990s outpaced the income derived from the sale of Canadian publishers' own titles. Similarly, during this same period, sales generated from the export of titles rose dramatically from $48 million in 1991-92 to $122 million in 1996-97.

Thus, taken together, there is some evidence that the Canadian publishing sector -- despite some fluctuations in profit levels -- experienced moderate growth during the 1990s. Unfortunately, because complete information on publisher entries and exits is not available, the impact of the sudden drop in publishers operating at a profit in 1996-97 is unclear.³² Furthermore, because Statistics Canada does not collect data on the basis of authorship -- that is, the publication of Canadian-authored vs.
non-Canadian-authored titles -- it is not possible to say anything about shifts in the publication of Canadian titles over time, using data from Statistics Canada.

The Government of Canada supports book publishing in Canada in a number of direct and indirect ways. The next section presents summary data related to these forms of support.

2. Federal Support to Book Publishing

The Statistics Canada data presented in the previous section provide some useful insights into the overall state of Canadian publishing between 1991 and 1997. They do not, however, shed light on the activities of Canadian publishers who were recipients of some form of government support. Moreover, they do not tell us whether such publishers were more profitable as a result.

The Department of Canadian Heritage and the Canada Council for the Arts are two agencies, however, that are able to provide insights into such questions, since for most of the 1990s they tracked the outcomes of the support that they provided to Canada's publishers. This section provides a summary of those data.

i. Publisher Support from the Department of Canadian Heritage

The federal government's principal and direct support to publishing is through the Book Publishing Industry Development Program (BPIDP) of the Department of Canadian Heritage. This program provides formula-based funding to publishers across the country on the basis of their sales of Canadian-authored titles. Its main objective "is to strengthen the capacity of the Canadian-owned
and -controlled industry to publish and market Canadian books in both domestic and international markets."³³ Statistics produced by BPIDP relate to those publishers who received some form of federal assistance. As such, they do not provide a complete picture of publishing in Canada, but do offer a useful profile of the publishing activities of a particular group of Canadian publishers.³⁴

ii. Publication of Canadian-Authored Titles

As can be seen in Table 2.2, in 1992-93, BPIDP invested $23 million in 178 publishers who published 5,109 titles, 3,667 of which were Canadian-authored. By 1998-99, BPIDP was investing $31.3 million in 201 publishers, who produced 5,417 tiles, of which 4,278 were Canadian-authored. This represents an overall increase of 17% in the number of Canadian-authored titles published. When broken down by language, these data also show that French-language publishers generally fared better than their English-language counterparts, with a 33.4% increase in Canadian-authored titles between 1992 and 1999.

Another positive trend related to the publication of Canadian-authored titles surfaces when one examines the percentage of new titles published by BPIDP participants. Table 2.2 reveals that, overall, the publication of Canadian-authored materials increased by roughly 7% between 1992 and 1999, with net revenues increasing almost 20% from $451 million to $569 million during those same years.

Thus, taken together, these data imply that Canadian publishers who received BPIDP support did not suffer permanent setbacks during the 1990s in their production of Canadian-authored materials.

iii. Revenues and Regional Variations

A 1998 program evaluation of the BPIDP notes that English and French publishers are essentially alike when compared by revenue size, although a higher percentage of French-language firms fall into the largest category of sales (that is, those with sales over $3 million). Furthermore, when examined by region and according to size of revenue, the most striking observation is that the majority (both French and English) fall within the $500,000 to $1 million revenue bracket (see Appendix C). In addition, BPIDP recipients of varying size, can be found in all regions apart from the Maritimes, which lacks publishers in the smallest and largest categories.³⁵

iv. Publisher Profitability

Cultural success and economic profitability do not always go hand-in-hand. According to Statistics Canada's review of publishing in Canada, approximately half of Canada's publishers were operating without profit in 1996-97.³⁶ Indeed, as table 2.3 demonstrates, most BPIDP recipients were not profitable before receiving support from the program.

Table 2.3 also shows that between 1992 and 1999, publisher profitability before BPIDP support ranged between 14% and 24%, with the early part of the decade showing the highest levels, the
mid-nineties showing a gradual decline, and the late nineties showing a slight resurgence in publisher profitability. Furthermore, although more French language publishers participating in the program were in profitable positions in 1992-93, by decade's end there was little variation between the overall number of profitable and non-profitable publishers, regardless of the language of publication.

Commenting on the success of the BPIDP program, Mr. Michael Wernick from Canadian Heritage noted:

... if you look at it as a diversity of content initiative, we would say it has been quite successful, the diversity of titles it has been successful. There are thousands and thousands of titles published every year by the firms that receive assistance from that program so if you look at it as a diversity of content initiative we would say it's been quite successful and compares very favourably to a lot of other initiatives. Where it's been less successful is if you measure it against an objective of the industrial structure of the industry. The industrial structure of the industry is more or less what it was about ten years ago. There hasn't been a lot of consolidation. There hasn't been a lot of entry or exit and as we were saying earlier, this problem of under-capitalization hasn't been addressed and it appears that if you're going to go after the issue of capitalization and sustainability you may need different kinds of instruments that are more targeted to that particular problem. What we're doing is we're blending cultural and industrial objectives in one program and it's been more successful in one than in the other.³⁷

v. Publisher Support from the Canada Council for the Arts

The Government of Canada also supports publishing in Canada through one of its cultural agencies, The Canada Council for the Arts. The Council operates at arm's-length from the government and provides support to Canadian publishers in addition to any assistance they can receive through the BPIDP program. Although the total amount available through the Council is relatively small ($7 million in 1999, with the smallest grant worth $5,000 and the largest valued at $121,000), the Canada Council sees its role as one that "encourages diversity of voice, experimentation and risk, and the capacity for research and development." ³⁸

Whereas the BPIDP program supports the publishing industry at large, the Council's support is based on selected titles publishers include in their catalogue. To this end, the Council believes that without its support, "which assists approximately 1,600 literary or cultural titles a year -- there would be very, very few serious books published in Canada." ³⁹

The Council's support comes in two categories, Emerging Publisher Grants that support new publishing ventures and Block Grants for established publishing houses. In 1999, fully 74% of publishers receiving support from the Canada Council for the Arts also received support through the BPIDP program.⁴⁰

Because of a granting formula based on titles, the Canada Council has useful data about the average print run of Canadian books -- sponsored by the Council -- and their average sales. It is important to note, however, that the usefulness of these data is limited in that they apply only to those publishers taking part in the Council's granting programs. These data are presented in Appendix C.

B. DIFFERENT WAYS OF COUNTING -- DIFFERENT VIEWS OF PUBLISHING

The Statistics Canada survey of book publishing in Canada is a wide-angle view that includes almost all book publishing activity in this country. The BPIDP view is somewhat more selective, focusing on a smaller number of Canadian-owned publishers and their sales and production of Canadian-authored books. The Canada Council for the Arts is yet more selective, focusing on an even smaller group of Canadian-owned publishers and the titles they release.

In an ideal world, it would be possible to work interchangeably with these three data sets, since each would cast light on the other and when combined, would offer a comprehensive portrait of publishing in Canada. Regrettably, this is not possible. Nor is it possible to examine these statistics in light of Statistics Canada surveys of retail and wholesale trade in Canada. Books tend to be included in a number of categories that sometimes also include magazines, newspapers and other printed matter. This lack of integrated and comprehensive statistical information is not helpful to a cultural industry that has been subject to a remarkable number of transitions over the past decade.

In A Sense of Place, A Sense of Being, the Standing Committee on Canadian Heritage recommended that "the collection of statistics on cultural activity be of the same quality and timeliness as those now available for other sectors of the Canadian economy."⁴¹ This report reinforces the importance of such an undertaking. Indeed, a recurrent refrain throughout the Committee's hearings was the need for better and more current information. The comments of Mr. Micheal Wernick from the Department of Canadian Heritage best sum up the challenge for today's book industry stakeholders:

Data collection and a sort of ... window in the marketplace is absolutely crucial. ... it's an area that needs a lot of attention. ... it's absolutely crucial [for] public policy makers and for industry actors. To take good decisions they need real time data and we're working very hard on this. I know that your report last June drew a lot of attention to this. We actually have a small project team at work on conceptual and feasibility work on a cultural observatory for Canada.⁴²

Thus, the issue of more useful and current information, extends well beyond a lack of current archival data such as those collected by Statistics Canada, Canadian Heritage and the Canada Council.

The absence of concrete -- and largely fundamental -- information regarding Canada's book publishing sector presents a challenge for the Committee. Based on witness testimony, it is clear that certain industry stakeholders -- particularly smaller publishers and booksellers -- are struggling to resituate themselves in an era of increased domestic and international competition and rapid technological change. Therefore, to address the issue of missing or incomplete statistical data and information on Canada's book publishing sector:

Recommendation 2.1

The Committee recommends that the Department of Canadian Heritage, in consultation with Statistics Canada and The Canada Council for the Arts, develop and implement a data collection and sharing strategy that allows for the timely collection of book industry statistics. The Department of Canadian Heritage should present a progress report to this Committee within six months of the Government's response to this report.

 

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²² The Canadian Book Publishing Industry, Brief submitted by the Department of Canadian Heritage, 7 December 1999.

²³ Meeting of the Standing Committee on Canadian Heritage, 2 March 2000.

²⁴ Brief submitted by Dr. Rowland Lorimer, Director, Canadian Centre for Studies in Publishing, 22 February 2000, p. 3.

²⁵ Mr. Christopher Smith, Owner, Collected Works; Acting Director, The Independents, 29 February 2000.

²⁶ Mr. Gaëtan Lévesque, Vice-President, Publishing of General Literature, Association nationale des éditeurs de livres, 2 March 2000.

²⁷ Brief submitted by the Association of Canadian Publishers, 2 March 2000, p. 5.

²⁸ Ms. Sheryl McKean, Executive Director, Canadian Booksellers Association, 7 December 1999.

²⁹ Survey of Book Publishers and Exclusive Agents, 1998, Statistics Canada.

³⁰ This is probably explained by a substantial cut in federal government support to book publishing for fiscal 1995-1996, from $30 to $16.6 million.

³¹ "Exclusive agency" is when a Canadian company enters into a contract with a foreign publisher to market their books in Canada.

³² Statistics Canada does collect information on the entries and exits of publishers within the Canadian market, however, data for 1998 are not yet available.

³³ BPIDP Applicants' Guide, 1999-2000.

³⁴ For the purposes of the Program, an eligible title is generally one that has been authored by a Canadian, published by a Canadian publisher and printed in Canada. See Appendix D for a summary of the program's criteria.

³⁵ "Book Publishing Industry Development Program Evaluation," Corporate Review Branch, 1998: 19.

³⁶ "Survey of Book Publishers and Exclusive Agents, 1996-97," Statistics Canada, 87F-0004-XPB, table 2.

³⁷ Standing Committee on Canadian Heritage, 9 May 2000. Unedited copy.

³⁸ Letter to the Chair of the Standing Committee on Canadian Heritage from Dr. Shirley Thomson, Director of the Canada Council for the Arts, 17 January 2000.

³⁹ Ibid.

⁴⁰ Ibid.

⁴¹ Recommendation 37, "A Sense of Being, A Sense of Place", Ninth Report of the Standing Committee on Canadian Heritage, June 1999.

⁴² Mr. Michael Wernick, Assistant Deputy Minister, Department of Canadian Heritage, 9 May 2000. Unedited copy.